please help me with this:Prob 10-1 Compute the annual interest payments and prin

Question

please help me with this:Prob 10-1 Compute the annual interest payments and principal amount for a Treasury Inflation-Protected Security with a par value of $1,000 Answer in the green shaded cells below and a 3 percent interest rate if inflation is 4 percent in year one, 5 percent in year two, and 6 percent in year three. Year Inflation Par Value Annual Coupon Interest 1 2 3 Prob 10-2 Judy Johnson is choosing between investing in two Treasury securities that mature in five years and have par values of $1,000. One is a Treasury note paying an annual coupon of 5.06 percent. The other is a TIPS which pays 3 percent interest annually. a. If inflation remains constant at 2 percent annually over the next five years, what will be Judy

Explanation / Answer

The principal amount moves with inflation or deflation. The corresponding interest payments are then based off the principal amounts. Par Value : $1000 interest rate = .03 Year One) $1000 x 1.04 = $1040 x .03 = $31.20 Year Two) $1000 x 1.05= $1050 x .03 = $31.50 Year Three) $1000 x 1.06 = $1060 x .03 = $31.80

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